U.S. inflation remained elevated in August, supporting the Federal Reserve's decision to raise interest rates for the first time in roughly three years. The Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, rose 0.3 percent in August and was up 3.4 percent compared with the same period last year.

"Core" prices, which exclude volatile food and energy costs, rose 0.2 percent from the previous month, representing a slight acceleration from July but modestly better than forecasters had expected. Compared with the same time last year, core prices were up 3 percent, unchanged from July's year-over-year increase.

Alongside the release of the latest PCE data, the Commerce Department implemented methodological changes that altered how prices are calculated in several categories. The new formula, applied retroactively to 2021 data, resulted in lower core inflation rates than previously reported. These revisions suggested inflation had not been running as hot as earlier data indicated.

Despite the relatively encouraging August data, the Fed is unlikely to materially change its view that more work is needed to achieve its 2 percent target. Most policymakers expect that level to be reached by 2029, with a majority believing the central bank will proceed with at least one more quarter-point increase after September's adjustment. Rates now stand at a range of 3.75 to 4 percent, with rate reductions expected to be delayed until 2028.